Balancing the books - Taoiseach must stick to his guns

Friday, December 04, 2009

ANY negotiations leading to do-or-die decisions will be characterised by leak and counter leak, by kite flying and brinkmanship of the most imaginative and undermining kind. Some represent realistic proposals, others are toe-in-the-water long shots to distract or provoke.

That may be why Liam Doran, of the INO, yesterday called on people to "back off and keep their mouths shut" while public service pay talks continue. Presumably he recognised that the issues at hand will define whether we remain economically independent or not.

Nevertheless, it is reassuring that Taoiseach Brian Cowen has reiterated that the target of saving €1.3bn in public sector pay has not been abandoned. He insisted that agreement would only be possible if the scale of the reduction in the public service pay bill was sufficient – presumably that’s €1.3bn unless mental reservation applies here too – if it was permanent and if there was no negative impact on services.

That sounds like a career-defining line in the sand.

If Mr Cowen concedes that public sector workers get unpaid leave in an effort to save some of the €1.3bn targeted, he will no longer be fit to lead this Government, this society or Fianna Fáil.

This has been recognised by some Fianna Fáil backbenchers who rightly dismissed it out of hand. That it was even being proposed is disconcerting and shows how deep the abyss between public and private sectors’ citizens has become. That outrage was accentuated by the prospect of another capitulation straight out of Bertie’s Little Book of Benchmarking, a capitulation no citizen, either publicly or privately employed, can ultimately afford.

We would all be foolish to take positions based on leaks but Mr Cowen or his Government cannot be in any doubt how unacceptable this proposal, real or otherwise, is.

Fine Gael’s Richard Burton reiterated what seems to be an obvious and equitable solution. He suggested staggered cuts in public pay related to income levels allied to profound reform. Though no one wants to see anyone’s circumstances reduced, this has an undeniable ring of truth and equity about it, especially in a country that cannot sustain a public service as large and as expensive as ours has become.

Another indication of how perilous our situation has become was revealed when it was reported that pension deficits at four of the top State companies has hit €4.5bn, equal to that of the top 25 firms on the Irish stock exchange. An Post, CIÉ, RTÉ and ESB hold only around 60% of the assets required to meet pension obligations. Already this year, in June, the Government pulled a number of underfunded pension funds from the public sector into the National Pensions Reserve Fund (NPRF). That move was intended to guarantee pensions but it brings obligations. The schemes have assets of €1.75bn – last June – but liabilities assessed at nearly double that at €3bn. This time bomb must cast a shadow over tax changes anticipated next week.

It has been suggested that higher rate allowances for pension contributions be ended. Surely, at a time when nearly all private pensions are in jeopardy, every encouragement should be given to those willing and able to make provisions for their retirements?

Once again, just as it is with the pay talks, this is a matter of leadership. We have less than a week to wait to find out who’s doing the leading.

This story appeared in the printed version of the Irish Examiner Friday, December 04, 2009